San Francisco's High-Tech Cost Advantage

With the exception of Manhattan, San Francisco may well be America's most expensive city. But when it comes to high-tech industry, the City by the Bay now actually has a cost advantage over nearby Silicon Valley.

Take the recent news that social media start-up Pinterest is hoping to move to San Francisco. As Om Malick writes at GigaOM:

[O]ffice space is to be had in San Francisco for about $3.55 per square foot per month versus $5.78 per square foot per month in downtown Palo Alto or $4.81 per square foot per month in the Palo Alto-Stanford Park area. Menlo Park rents are running at $5.21 per square foot per month.

No surprise that Pinterest is now looking to move to San Francisco. Friends in the real estate market say that it has been toying with the idea of taking over the spot previously occupied by Digg. The rising office rents are only part of the story for startups. The tech boom is boosting demand for housing for tech workers and that is causing civic discord.

Malick points to this infographic by Justin Bedecarre of the real estate company Cushman & Wakefield, which compares the locational advantages of Silicon Valley and San Francisco.

Click on the infographic for a larger image

In addition to its possible cost advantage in office space, San Francisco also offers the walkability, transit access, vibrancy, and urbanity that are attractive to a growing number of tech professionals.

Even more than the dot-com bubble of the 1990s, this boom could transform the fabric of the city.

This time, Twitter, Zynga, Yelp and other social network companies favored by venture capitalists have made San Francisco their home, creating jobs and raising commercial rents. At the same time, a growing number of young Silicon Valley workers, drawn by San Francisco’s urban charms, are also moving into the city as commuters and further raising rents.

In a city often regarded as unfriendly to business, Mayor Edwin M. Lee, elected last year with the tech industry’s strong backing, has aggressively courted start-ups.

Silicon Valley has, for years, tried to recreate the vibrancy of a dense city in its office parks. Now more and more tech companies are looking for the real thing. Any cost advantage will only help accelerate this process.

Photo: Reuters/Robert Galbraith

About the Author

Richard Florida is a co-founder and editor at large of CityLab and a senior editor at The Atlantic. He isthe director of the Martin Prosperity Institute at the University of Toronto and Global Research Professor at New York University.